TheBig

Deal

“Pantaloon Retail to be Future India”- Times of India

“Aditya Birla to acquire stake in Pantaloon”- Hindustan Times

“Aditya Birla Nuvo to buy out Biyani’s Pantaloon unit”

- Indian Express

“Aditya Birla Nuvo to invest Rs 1,600 crore in Pantaloon stores”

- Economic Times

1600 Crores

The Highlights Majority stake: Aditya Birla Nuvo will infuse Rs.1,600 crore in Future Group’s Pantaloons department retail chain business.

As part of the deal, the apparel and fashion retail stores under the Pantaloons format will be spun off from Pantaloon Retail, which is part of the Future group, into a separate entity.

Post this deal, ABN will have a minimum 50.01 percent stake in the newly created entity post the open offer. However, Kishore Biyani’s Future group will continue to have around 25 percent in the de-merged entity.

ABNL, which owns apparel brands such as Louis Philippe and Allen Solly, said it will infuse Rs.1,600 crore in the Pantaloons department retail chain business by issuing debentures worth Rs. 800 crore at mutually agreed terms and taking on debt of Rs. 800 crore.

The separation will help PRIL, which had debt of Rs. 5,800 crore as of December 2011, reduce this amount by Rs. 1,600 crore, according to a PRIL statement.

Rakesh Biyani, managing director at PRIL, and Kailash Bhatia, an executive director at the firm, will continue to manage the Pantaloons chain.

Why is it a Win – Win for both companies??? Lets see…..

How the deal helps Aditya Birla

Pantaloons, launched in 1997, is the largest fashion retailer in the country by market capitalisation. Gaining a controlling stake in the company will help Aditya Birla Nuvo expand in the branded apparel business.

ABN’s chairman Kumar Mangalam Birla said the proposed acquisition is in line with its strategic intent to create “the largest integrated branded fashion player in the country”. ABN has its own presence in the apparel retail business through its Madura Fashion and Lifestyle division, which owns renowned brands like Allen Solly, Louis Philippe & Van Heusen.

While ABN is strong in men’s brands, acquiring a controlling stake in Pantaloon gives it several brands across categories for men, women and children

The new entity is likely to become India’s largest fashion retailer, according to experts. The purchase will help Madura add more than two million square feet to its existing retail space of 1.6 million square feet.

How the deal helps Future Group Pantaloon Retail’s debt will decline by Rs 1,600 crore. That will go some way in soothing investor concerns, since the Future group has a worrying debt level of about Rs 5,000 crore. The deal with ABN, which is likely to be carried out in phases over 8-10 months, is set to cut Future’s debt by Rs 1,600 crore.

One analyst at a foreign brokerage said that selling off the fashion apparel business would lower Pantaloons inventory days, which is one of the highest in the industry, leading to more efficient working capital, according to The Economic Times. Inventory days is a ratio that measures the average number of days a company holds inventory before selling it.

The deal comes at a difficult time for retailers, many of who have been scrambling for funds after the government back-tracked on a proposal to allow foreign direct investment in the multi-brand retail sector last year. A number of retailers like Subhiksha and Vishal Retail have had to shut shop or sell out after defaulting on loans, and some like Koutons Retail are struggling for survival.

Adobe Acrobat DocumentThe Press Release

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